Mexico's LNG projects face moment of truth as developers hold back on investment decisions

Mexico's dream of becoming the world's fourth largest exporter of liquefied natural gas (LNG) are in doubt, as financiers are getting cold feet and developers are delaying final investment decisions.

The country's largest LNG projects aim to import natural gas via pipeline from abundant shale gas reserves in the US and liquefy it in terminals along the Pacific coast. They then plan to export the gas to energy-hungry markets in Asia, without ships having to go through the Panama Canal.

As political concerns mount on both sides of the border, nearly all of those projects are facing delays to their initial timetables. 

In the US, the Biden administration has paused the issue of permits for exports of LNG to countries with which the US does not have a free trade agreement (FTA). 

While the largest Mexican projects already have authorizations from the US Department of Energy (DoE) to export US-sourced natural gas, those approvals expire in the coming years and financial institutions are unlikely to provide financing unless extensions are granted.

In Mexico there are also increasing worries about energy security, as the US supplies Mexico with at least 75% of its natural gas. During a winter storm in 2021, northern Mexico suffered severe power cuts when that supply was cut off. The possibility of a second Donald Trump presidency is exacerbating those concerns due to his previous "America First" energy policies, which prioritized domestic energy production and supply.

Furthermore, analysts say that under the incoming administration of president-elect Claudia Sheinbaum, Mexico's state-owned utility CFE may prefer to use natural gas to feed the country's own industries and power plants, rather than working with foreign developers to export the gas overseas. 

Delays to marquee projects

Mexico's flagship LNG project is the US$14 billion Saguaro Energía plant that Mexico Pacific is developing in Puerto Libertad, Sonora state. The company has missed its target of making a FID in the first half of this year. 

While the project has secured offtake agreements from energy majors including ConocoPhillips, Shell, Woodside and ExxonMobil, the non-FTA permit for the three-train, 15Mt/y (million tons per year) facility expires in December 2025. ConocoPhillips said this month that the FID had been delayed by the permitting uncertainty.

The project will also require long and expensive pipelines to be built on both sides of the border.

"Mexico Pacific anticipates achieving an FID in 2024," a company spokeswoman told BNamericas, without specifying how many trains would be approved.

Meanwhile, US energy company Sempra has delayed the start of commercial operations at Energía Costa Azul (ECA) in Baja California state from the summer of 2025 to the spring of 2026, citing labor difficulties. The delay will add another US$300mn to the cost of the project, which was initially estimated at around US$2bn.

Phase 1 of the project will have capacity to produce 3.25Mt/y of LNG and already has 20-year sale and purchase agreements with TotalEnergies and Mitsui. Phase 2 could add 12Mt/y of export capacity if Sempra approves the expansion.

Sempra's difficulties at ECA Phase 1 do not bode well for the fate of Phase 2 or of the company's Vista Pacífico project further south on the coast of Sinaloa state. Vista Pacífico, which has not received an FID, will have export capacity of around 3Mt/y. 

The Amigo export facility being developed by the Singapore-based LNG Alliance at the port of Guaymas in Sonora has also appeared to hit a hurdle. An FID that was expected in July has not yet materialized.

The Amigo project, which has a non-FTA permit from the DoE that expires in 2027, will export 4.2Mt/y of LNG from a first train, with potential to add a second train of 3.6Mt/y. Amigo had originally expected to send its first LNG shipment to Asia in 2Q26 but it now seems unlikely to meet the DoE's deadline.

Regional markets

In May, Houston-based Big River Energy and its Mexican partners sought approval from the DoE to export LNG to FTA countries from a proposed 4Mt/y plant in Manzanillo. The project, Gato Negro Permitium Uno, began the Mexican permitting process in June 2022. The developers say that as well as exporting LNG they may sell some natural gas for consumption within Mexico. 

The Gato Negro project appears to be delayed. The developers originally applied for a 20-year authorization from the DoE, effective from an expected launch of commercial operations in September 2027. In a supplemental filing in August, they requested that approval be "effective on the date of first exportation under this authorization, and terminate on December 31, 2050."

Elsewhere, Houston-based energy companies Pilot LNG and GFI LNG are teaming up to develop an LNG terminal in the Salina Cruz in Oaxaca state.

The small-scale Salina Cruz LNG joint venture will produce 0.34Mt/y of LNG. An FID is expected in the second half of 2025 and operations will start in mid-to-late 2027.

Salina Cruz LNG will use Mexican gas instead of gas from the US. It will supply North and Central American bunker, transportation and fuel-to-power markets rather than the Asian export markets that are being targeted by Mexico's larger LNG projects.

Another LNG project focused on regional markets is the 1.4Mt/y offshore LNG terminal in the Gulf of Mexico that US energy firm New Fortress Energy commissioned in July. Located offshore Altamira, the terminal has made its first delivery of LNG to a power plant operated by CFE. It will also send shipments to markets such as Puerto Rico. 

NFE has closed a US$700mn loan for a second LNG terminal, which will be located onshore at Altamira. The onshore terminal will be developed in partnership with CFE.